Lm slide chapter 5

HO CHI MINH CITY UNIVERSITY OF TRANSPORT CHAPTER 5: WAREHOUSE MANAGEMENT LEARNING OBJECTIVES After the completion of this chapter, students should be able to: ü Explain the roles of warehouse ü List the added values created by warehouses ü Explain the warehouse-related decisions ü Review the general activities of warehouse and warehousing ü Describe the basic layout of a warehouse TS Lê Phúc Hòa, Ths Nguyễn Thị Bảo Khánh CHAPTER OUTLINE 5.1 Roles of warehouses in the Logistics system 5.2 Added values of warehouses 5.3 Basic warehouse decisions 5.4 Warehouse operations 5.5 Principles of a warehouse layout TS Lê Phúc Hòa, Ths Nguyễn Thị Bảo Khánh REFERENCE LIST [4]-Douglas M.lambert James R.Stock,Lisa M Ellram, Fundamentals of Logistics Management, McGraw-Hill,1998 – Chapter [10]-Đặng Đình Hào, Trần Văn Bảo, Phạm Cảnh Huy, Đặng Thị Thúy Hằng (2018), Giáo trình Quản trị logistics, Nxb Tài Chính – Chapter [12]-Trường đại học Kinh tế Tp HCM (2012), Quản trị hậu cần, Nxb Đại học kinh tế quốc dân – Chapter [15]-James C Johnson, Donald F Wood, Daniel L Wardlow, Paul R Murphy,Jr (1999), Contemporary Logistics, Prentice Hall – Chapter [18]-Ronald H Ballou (1999), Business Logistics Management, NXB Prentice Hall, 1999 – Chapter 8, 10, 12 TS Lê Phúc Hòa, Ths Nguyễn Thị Bảo Khánh 5.1 ROLES OF WAREHOUSES IN THE LOGISTICS SYSTEMS - Warehouses act as nodes in the Logistics system and in the Supply chain in general - Warehouses store the materials, WIP and finished goods - Warehouse and warehousing incur cost to the Logistics activity - Warehouse and warehousing create added values rather than adding cost to products TS Lê Phúc Hòa, Ths Nguyễn Thị Bảo Khánh CASE STUDY The national office of Combined Charities provided materials for the fundraising campaigns of a number of well-known charitable and political organization When a job was contracted, the typical procedure was to dedicate the entire workplace and printing equipment of the company to preparing the materials for a single campaign After the production was completed, the document was sent by UPS directly from the printing site to local distribution points The company’s president though that overall costs might be lower if warehouse space could be rented at various regional locations around the country Although warehousing would be an added expense, he thought that he could ship truckload quantities to the 35 warehouses to the local areas Production costs could also be reduced because the local areas could draw from warehouse stocks rather than placing orders directly on the printing operation, which often caused a change in the production schedule The president made following rough cost calculations for a typical campaign in which million pieces of literature would be produced Ship Direct from Plant Production costs Ship Through 35 Warehouses Change in Costs $500,000 $425,000 -$75,000 To warehouse $50,000 +$50,000 To local area $250,000 $100,000 -$150,000 Warehouse cost $75,000 +$75,000 Total $750,000 $650,000 -$100,000 Transportation costs: v Warehouse categories TS Lê Phúc Hòa, ThS Nguyễn Thị Bảo Khánh v Some types of warehouses in import/export TS Lê Phúc Hòa, Ths Nguyễn Thị Bảo Khánh 5.2 ADDED VALUES OF WAREHOUSES No Value-adding Roles Trade-off Areas Consolidation Transportation Product mixing Order filling Service Lead times, Stockouts Contingency protection Stockouts (supply, distribute) Smooth operation Production Source: John J.Coyle; Edward J Bardi; C.John Langley Jr ( (2003) TS Lê Phúc Hòa, ThS Nguyễn Thị Bảo Khánh Transport consolidation Supplier warehouse Supplier Volume shipment Plant Supplier Plant Volume shipment Market Warehouse Plant Warehouse Plant break volume in transport TS Lê Phúc Hòa, ThS Nguyễn Thị Bảo Khánh Market Market 10 Supply and Product Mixing Plant I: A&B Product Mixing B,C,F,G Plant I: B&C Plant I: D&E A,B,C Raw Material B Customer Y Warehouse A,G Customer z Plant I: F&G Raw Material A Customer X A,B,C,D.E Customer W Supply Mixing A,B,C,D Warehouse Plant Vendor source C Vendor source D TS Lê Phúc Hòa, ThS Nguyễn Thị Bảo Khánh 11 5.3 BASIC WAREHOUSE DECISIONS (Based on cost trade-off) Ownership (private, lease) How many (Centralized, Decentralized) What size Where (location) Interior layout What product, where Source: John J.Coyle; Edward J Bardi; C.John Langley Jr ( (2003) TS Lê Phúc Hòa, ThS Nguyễn Thị Bảo Khánh 12 v Ownership decision • Space is rented by all legitimate users • Normally on a month-tomonth basis • Warehouse is owned by the firm to store goods Public warehousing Private warehousing Contract warehousing Multiclient warehousing • A second option for renting warehouse which provides tailored warehouse to one client only TS Lê Phúc Hòa, ThS Nguyễn Thị Bảo Khánh • Mixed attributes of contract and public warehouse, whose number of clients range from to a dozen 13 GROUP DISCUSSION WHAT ARE THE ADVANTAGES AND DISADVANTAGES OF (1) PRIVATE WAREHOUSE AND (2) PUBLIC WAREHOUSE? PUBLIC WAREHOUSE PRIVATE WAREHOUSE ADVANTAGES DISADVANTAGES TS Lê Phúc Hòa, ThS Nguyễn Thị Bảo Khánh 14 v Warehouse location decision Some factors that affects the decision to selection a warehouse’s location: - Natural resources - Population characteristics - Tax and incentives - Transportation factors - Proximity to Industry Cluster - Trade patterns - Quality-of-life considerations - … Dr Le Phuc Hoa, MSc Nguyen Thi Bao Khanh 15 5.4 WAREHOUSE OPERATIONS - Inventory and warehousing are closely related - Warehouses are designed to be compatible with different inventory methods - There are main inventory methods for warehouse operations: + Unit storage (traditional method): all products of the same type are stored together (simple, efficient) + Functional storage: all the different products related to the needs of a certain type of customer or related to a specific task are stored together (effectively picking and packing, taking up storage space) + Cross-docking: Wal-Mart innovates to improve supply chain efficiency According to this method, product is not actually in stock The trucks coming from the suppliers carry a large number of different products The consignment is then divided into smaller lots Small batches of different products according to daily needs and quickly loaded onto another truck to carry products to final delivery point Dr Le Phuc Hoa, MSc Nguyen Thi Bao Khanh 16 v Basic warehouse operations: Intput Receiving ( in dock): +Schediule carrier +Unload vehicle +Inspect for damage +Compare Percase Order Put-away: Identify product; Identify storage location; Move product; Update record Shipping preparation: Packaging; Labeling; Staging Warehouse process Storage: Equipment; Stock location (popularity, Unit size, cube) Order picking: Information; Walk & Pick; Batch Picking Shipping: Schedule carrier; Load vehicle; B/L; Record update Dr Le Phuc Hoa, MSc Nguyen Thi Bao Khanh Output 17 Figure 5.2: Cross-docking operations Dr Le Phuc Hoa, MSc Nguyen Thi Bao Khanh 18 5.5 PRINCIPLES OF A WAREHOUSE LAYOUT - The layout of a warehouse should serve its functions, providing the most suitable working conditions for people, goods and equipment - In warehouse design, understanding how trade-offs work shall help managers to make more efficient decisions Some trade-offs might be fixed vs variable slot location, vertical vs horizontal build, aisles width, dock layout, and so on Figure 5.3: Basic layout of a warehouse Receiving Basic strorage area Order selection and preparation Dr Le Phuc Hoa, MSc Nguyen Thi Bao Khanh Shipping 19 vFAST principle in warehouse operations • Prevent bottlenecks • Place similar processes or subsequent inventory processes closer to each other How easy is it to retrieve or reach inventory? How the warehouse would recalibrate or adjust to order volumes for different types of inventory? • Space allocation • Space utilization Dr Le Phuc Hoa, MSc Nguyen Thi Bao Khanh 20 ... Through 35 Warehouses Change in Costs $50 0,000 $4 25, 000 -$ 75, 000 To warehouse $50 ,000 + $50 ,000 To local area $ 250 ,000 $100,000 -$ 150 ,000 Warehouse cost $ 75, 000 +$ 75, 000 Total $ 750 ,000 $ 650 ,000... Nguyễn Thị Bảo Khánh CHAPTER OUTLINE 5. 1 Roles of warehouses in the Logistics system 5. 2 Added values of warehouses 5. 3 Basic warehouse decisions 5. 4 Warehouse operations 5. 5 Principles of a warehouse... Nxb Đại học kinh tế quốc dân – Chapter [ 15] -James C Johnson, Donald F Wood, Daniel L Wardlow, Paul R Murphy,Jr (1999), Contemporary Logistics, Prentice Hall – Chapter [18]-Ronald H Ballou (1999),